Contract Practice

Question 1

On your PwC project you mentioned “NBS Chorus”. What is that?

Answer 1

The software used to assemble the Contract Preliminaries.

Question 2

You mentioned the Contractor would need some insurances, could you list some insurances the Contractor might need under a JCT D&B?

Answer 2

1) Contractor’s all risk
2) Professional Indenmity
3) Bonds (Performance bonds, material off-site bond).

Question 3

On Chelsea Barracks & PWI, you stated working with Vesting certificate. What is this?

Answer 3

Used to confirm that the ownership of the goods, plant, or materials will transfer from one party to another on payment.

Question 4

What are alternatives to a vesting certificate you could use?

Answer 4

Materials off-site bond.

Question 5

What is a performance bond?

Answer 5

A performance bond is a form of security for the Employer or Developer.

It is a guarantee from the bank / insurance company to make payment to the employer should the Contractor default under the contract.

Question 6

What was the value of the bond

Answer 6

1% of the Contract Sum, around £225,000

Question 7

What is the typical cost of a performance bond?

Answer 7

It depends on the financial stability of the Contractor and the number of previous claims. But typically 1% of the contract sum.

Question 8

Are you aware of any case law relating to Construction?

Answer 8

Ampleforth Abbey Trust vs Turner & Townsend

Question 9

What value did the performance bond protect the Client?

Answer 9

10% of the Contract Sum.

Question 10

What are signs a Contractor is financially unstable?

Answer 10

1) Word of mouth
2) Cashflow issues
3) Lack of personnel on site
4) Delays on site / poor quality
5) High cost in performance bond

Question 11

What are the different kinds of performance bonds?

Answer 11

Conditional and On-demand

Question 12

What is a conditional bond?

Answer 12

The Client must provide evidence that the Contractor has not met the terms of the Contract. They must also prove they have suffered financial loss.

Question 13

What is required for a legally enforceable contract?

Answer 13

1) Offer
2) Consideration
3) Intent to create legal relations
4) Acceptance

Question 14

What information comprises contract documents?

Answer 14

1) Index of Contract Docs
2) Contract Amendments
3) Commercial
4) Preliminaries
5) Drawings and Specification

• if D&B, you have ER’s and CP’s.

Question 15

What are the valuation timelines?

Answer 15

Under JCT D&B:

1) Application Date

2) Due Date + 7 days

3) Payment Notice + 5 days

4) Final date for Payment + 14 days

5) Final date for pay-less -5 days.

Question 16

What happens at Practical Completion?

Answer 16

1) Works certified as complete, although likely with a snag list of works to be undertaken during the rectification period.

2) The rectification period begins (snags)

3) Insurance requirements passed back to Client

4) LD’s no longer an option

5) Release of retention - typically half.

Question 17

What are the different insurance requirements under JCT?

Answer 17

EL - Employers Liability (death in construction)
PL - Public Liability
PI - Professional Indemnity

Question 18

What are the Building Insurance requirements under JCT?

Answer 18

Option A - New works, by Contractor

Option B - New Works, by Employer

Option C - Existing, by Employer

(Other - Terrorism, All-Risk)

Question 19

What are third party rights?

Answer 19

A statutory right that creates right for a party not in the original contract to have an interest.

Question 20

What do you factor/consider into your payment schedule regarding contract conditions and statutory conditions?

Answer 20

Reckoning Days - Bank holidays.

Updated for any amendments to payment timescales.